Making Tax Digital for Sole Traders: A Plain-English Guide (and What to Do This Month)
No jargon, no panic. Just what it means, whether it applies to you, and the simple steps to get ready.
If you’ve seen the letters MTD pop up in an email, an accountant’s newsletter or a Facebook group, and quietly decided to deal with it “later,” this post is for you.
I completely understand that instinct. Tax changes always sound enormous and confusing, and when you’re running a business on your own there’s always something more urgent. But I’ve spent 17 years supporting busy people behind the scenes, and here’s what I’ve noticed: most of the stress around finances isn’t the maths. It’s not knowing where you stand.
So let’s take the mystery out of it. Here’s what’s changing, whether it applies to you, and what you can do this month so that future you feels calm instead of caught out.
(A quick note: this is general information from a VA with a BSc in Applied Accounting, not personal tax advice. For your own situation, check GOV.UK or ask your accountant.)
What is Making Tax Digital, in plain English?
Until now, most self-employed people have done one big Self Assessment return a year. Making Tax Digital for Income Tax (MTD) changes the rhythm. Instead, you:
keep your income and expense records digitally, in software that works with HMRC
send HMRC a short update every three months
send a final declaration at the end of the year, which replaces the old tax return
The reassuring part is that quarterly updates contain totals for your income and expense categories, not every individual transaction. It’s more frequent, but it’s also smaller. (tinytax)
Does it apply to you?
It depends on your gross income, which means what came in before expenses. The threshold is over £50,000 from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028, each based on income from an earlier tax year. axa
That means:
Over £50,000 in 2024/25: you’re already in it.
Over £30,000 in 2025/26: you start on 6 April 2027. That tax year has already ended, so you can check your number today.
Over £20,000 in 2026/27: you start in April 2028.
Two details people often miss. Only business or property income counts towards the threshold. Employment income, pensions, dividends and savings interest don’t. And if you trade through a limited company, MTD for Income Tax doesn’t apply to the company, because companies follow different rules. Exemptions also exist in limited circumstances, and GOV.UK explains who can apply. (businessaccountingbasics1) (office)
The dates worth knowing
7 November 2026: the deadline for the second quarterly update, for anyone already in MTD. (campaign)
31 January 2027: your Self Assessment return for 2025/26 is still filed the usual way. Nothing about this January changes. (campaign)
6 April 2027: the date from which the £30,000 group must keep records using MTD software. (campaign)
7 August 2027: the first quarterly update for that group. (campaign)
After that, the pattern repeats: updates are due on 7 August, 7 November, 7 February and 7 May. Put these in your diary now. (tinytax)
Six simple steps to get ready
1. Find your number.Add up your gross self-employment income for 2025/26 (before expenses). That one figure tells you which group you’re in.
2. Know your start date.Over £50,000 means you’re already in. Over £30,000 means April 2027. Over £20,000 means April 2028. Write it down.
3. Separate your business and personal money.It isn’t a legal requirement for sole traders, but a dedicated business bank account makes your records dramatically simpler. Simple is the whole game here.
4. Choose software and start using it now.Pick software on HMRC’s current list of MTD-compatible products. I’ve worked with FreeAgent and Sage 50, but whatever you choose, check it’s ready for MTD for Income Tax before you commit. The best software is the one you’ll actually open every week. Start using it before you have to, so your first quarterly update isn’t also your first day with a new system.
5. Build a ten-minute Friday habit.Before you close your laptop on Friday, look at what came in, categorise what went out, and chase any overdue invoices. Keep your receipts in one place (a folder or a photo app is fine). Done weekly, a quarterly update becomes a quick summary instead of a scramble.
6. Decide who sends the updates.Some people send their own, others ask their accountant. There’s no wrong answer. Either way, clean records are what make it smooth instead of stressful.
A calmer way to think about it
Nothing about MTD asks you to become an accountant. It asks you to keep tidy records a little more often. The founders who find change like this stressful aren’t less capable. They’re usually the ones with a backlog and no system, which is a very common place to be, and a very fixable one.
When it’s time to hand some of it over
If you’ve read this and thought, “I understand it, I just can’t face doing it,” that’s a completely valid place to land.
I’m Lucia, a Virtual Assistant with a BSc in Applied Accounting and hands-on bookkeeping experience. I help self-employed women get their records organised, up to date and ready, so that whoever files, you or your accountant, is working from clean figures. If your bookkeeping needs getting into shape before the new rules reach you, I’d love to help.
A discovery call is free, relaxed and completely pressure-free.
General information only, correct at the time of writing. Check GOV.UK or speak to your accountant about your own situation.
Comments